Financial Management — Class 12 Business Studies PYQs

The risk related to inability to meet fixed financial charges like interest payment and other repayment obligations is known as :
[Max Marks: 1 | Set: 66/1/1 | Set: 66/1/2 | Set: 66/1/3]

State any three points of importance of Financial Planning.
OR
State any three factors that affect the fixed capital requirements of a company.
[Max Marks: 3 | Set: 66/1/1 | Set: 66/1/2 | Set: 66/1/3]

VK Ltd. is a fast moving consumer goods company. It has shareholders spread all over India. Most of its shareholders depend upon a regular income from their investment.
VK Ltd. has been earning consistent profits. The management of the company keeps in mind the preference of the shareholders regarding payment of dividend. Since its shareholders, in general, desire that atleast a certain amount is paid as dividend to them every year, the company declares dividend every year.
Atul, the Finance Manager of the company identified promising growth opportunities. He suggested to the Chief Executive Officer to retain the earnings to finance the required investments instead of declaring dividend every year. For this, the Chief Executive Officer decided to call a General Body Meeting of the shareholders.
(i) Identify two factors affecting dividend decision discussed above.
(ii) State two other factors that affect the dividend decision of a company.
[Max Marks: 4 | Set: 66/1/1 | Set: 66/1/2 | Set: 66/1/3]

'Isha Sweets' was set by Isha Sharma to prepare and sell organic, vegan and healthy sweets alternatives like hazelnuts date ladoos, dry fruit date burfi, stuffed mejdool date etc. For the last many years, the demand for her products was very high as people these days prefer to buy healthier alternatives for consumption as well as gifting purposes. But this year suddenly, the cost of dates, dry fruits and other ingredients used for preparing these healthy sweets had increased. With rising prices of raw materials, larger amounts of funds were required to maintain a constant volume of production and sales. As a result, the working capital requirement of 'Isha Sweets' became higher.
The factor which led to an increase in the working capital requirements of 'Isha Sweets' was :
[Max Marks: 1 | Set: 66/1/3 | Set: 66/2/1 | Set: 66/2/2 | Set: 66/2/3]

CVX Ltd. was a leading company, manufacturing home appliances like food processors, juicers and mixer grinders. The company was earning good profits and was paying high dividends to its shareholders consistently. The company now decided to manufacture soup-making machines, pop-up toasters and electric irons. The company wanted to enter into emerging markets out of India also. Entering these markets will require additional capital investment which will facilitate in production and distribution infrastructure etc. For this, the management decided to retain money out of their earnings to finance the required investment and distribute smaller dividend to the shareholders.
The factor affecting dividend decision which was kept in mind by the management of CVX Ltd. for entering into emerging markets and launching new products was :
[Max Marks: 1 | Set: 66/1/3 | Set: 66/2/1 | Set: 66/2/2 | Set: 66/2/3]

'Increase in the profit earned by the equity shareholders due to the presence of fixed financial charges like interest' is called :
[Max Marks: 1 | Set: 66/2/1 | Set: 66/2/2 | Set: 66/2/3]

Read the following statements carefully :
Statement – I : The cost of debt is more than the cost of equity.
Statement – II : Lenders risk is lower than the equity shareholders risk.
In the light of the given statements, choose the correct alternative from the following :
[Max Marks: 1 | Set: 66/2/1 | Set: 66/2/2 | Set: 66/2/3]

'To ensure that enough funds are available at right time to honour the commitments and to carry out the plans' is discussed in which of the following concepts ?
[Max Marks: 1 | Set: 66/2/1 | Set: 66/2/2 | Set: 66/2/3]

The demand for take away food business is increasing day-by-day. People working in multi-national companies have to work till night very often and they are reluctant to cook food. Taking advantage of this opportunity, Amit and Bijoy started 'Langar', a take away food business. The food became famous because of its good quality and standards of hygiene followed by them.
Over the years, the business became very profitable. They decided to expand the business by opening more branches in different cities. To ensure consistent food quality at all branches and to maintain the hygiene and quality they planned to import machines with advanced technology. The cost of each machine was Rs. 12 crores. They knew that this decision has to be taken very carefully, as it involves a huge cost and that the decision, once taken is irreversible.
(i) Identify and state the financial decision discussed in the above para.
(ii) Explain any two factors affecting the decision identified in (i) above.
[Max Marks: 4 | Set: 66/1/3 | Set: 66/2/1 | Set: 66/2/2 | Set: 66/2/3]

‘Dovex’ was a large company with a renowned name in healthcare industry, specialising in the development and production of life saving medications and medical devices. With a strong reputation for ethical practices, ‘Dovex’ attracted a large number of investors who had great faith in the company’s future. This allowed ‘Dovex’ to raise capital easily from the market whenever expansion or new projects were to be undertaken. As a result, it could pay high dividends to the shareholders. The factor affecting dividend decision discussed above, which allowed ‘Dovex’ to pay high dividends to the shareholders is :
(A) Cash flow position
(B) Stock market reaction
(C) Legal constraints
(D) Access to capital market